Ateneo de Davao University School of Business and Governance E.

Jacinto Street, Davao City In Partial Fulfillment of the Requirements in Management Accounting I & II Financial Analyses of Various Davao-based Corporations Asaje Realty Corporation Damosa Land, Inc. Lapanday Agricultural Corporation Submitted to Prof. Cleofe Arib, CPA, MBA MAS1 Professor Submitted by Arcinas, Erwin Lucky L. Bretaa, Denee Vi M. Estrada, Kaiser C. Macarayo, Andrew D. Pelegrino, Floreza Mae C. October 2012

Asaje Realty Corporation

The company was incorporated in the Philippines primarily to engage in buying, developing, leasing, and selling all kinds of real estate (Note 1)

Horizontal Analysis Asaje Realty Corporation

Amount of inc a /(de re e re se c as )

I NCOM E ST AT EM ENT Re nue ve Dire cost a e nse (Cost of Sa ) ct nd xpe s le Equity in Ne I ncome of Subsidia t ry I nte st Expe re nce Ne income t

2009 PH P 22,227,320.00 2,829,511.00 1,382,251.00 3,159,973.00

Pe nta e rce g 74% 0% 72% 1381% 50%

2010 PH P 30,212,084.00 208,671.00 3,925,313.00 100,119.00 6,344,042.00 100% 100% 100% 100% 100%

2011 PH P 22,483,645.00 -

Pe nta e rce g 74% 0%

(PH P 7,728,439.00) (208,671.00) (31,244,600.00) (60,308.00) (32,853,914.00)

(27,319,287.00) -696% 39,811.00 40%

(26,509,872.00) -418%

BAL ANCE SH EET Accounts re iva - ne ce ble t I nve ntory I nve stme in a nts ssocia s te T ra a othe pa ble de nd r ya s Re ine Ea ta d rnings

2009 PH P 8,459,480.00 86,543.00 30,563,193.00 22,820,722.00 53,487,941.00

Pe nta e rce g 36% 128% 107% 17% 89%

2010 PH P 23,378,056.00 67,409.00 28,563,193.00 138,286,626.00 59,831,983.00

Pe nta e rce g 100% 100% 100% 100% 100%

2011 PH P 22,967,952.00 67,409.00 28,563,193.00 137,286,716.00 33,322,111.00 98% 100% 100% 99% 56%

Amount of inc a /(de re e re se c as )

(PH P 410,104.00) (999,910.00) (26,509,872.00)

*Refer to the attached audited financial statements at the end of this analysis for a detailed Financial Statement.

Income statement items. All line item computations are based from 2010 information. The data revealed that the Revenue increases from 2009 to 2010 for about 26.43%, this increase in revenues will help determine that the net income for the year will somewhat increase as well. Since there are no Cost of Sale for the year 2009, the percentage change based from the data in 2010 is 100%, this change is due to the decrease or sale of the inventory. The interest expense 2009 decreases for about 1,300,000 in 2010 due to the decrease in the loans payable. The net income in 2009 doubled in 2010 because of the increase in revenue, other income and equity in net income of subsidiary as well as the sudden decrease of interest expense. Based from the revenue in 2010 the revenue for 2011 decreases for about 25%, this decrease will affect the percentage change of the net income. The net income from 2010 decreases for about 32,000,000 due to the decrease in revenue as well as the decrease of the equity in net income of subsidiary. As the result of this analysis, the manager must evaluate the reason behind of the huge decrease in the equity in net income of subsidiary (DIMDI Centre, Inc.). Balance Sheet Items. All computations are based from the 2010 data. From the asset component, the accounts receivable increases for approximately 63% in 2010. This increase can be related to the increase in the revenue, since most of its revenue was on credit. There is a decrease in inventory for almost 30% from 2009 to 2010 which resulted to an increase in the cost of sale. The investment in associates decreases for exactly 2,000,000 in 2010. While on the other component, the total liabilities and equities, the trade and other payables increases for almost 75% from year 2009 to year 2010. The increase in the retained earnings resulted from the increase in net income. The accounts receivable in year 2011 decreases for around 2% because of the decrease in the revenue for the said year. The inventory and the investment in associates remains the same. The investment in associate didnt change since there was no change in the dividend income for the comparative years. The trade and other payables decrease for only about .30% from year 2010 to year 2011. The approximately 45% decrease in the retained earnings resulted from the decrease in the comparative years net income.

Vertical Analysis Asaje Realty Corporation

I NCOM E ST AT EM ENT Re nue ve Dire Cost a Expe s ct nd nse Cost of Sa le I nte st Expe re nse Equity in Ne I ncome of Subsidia t ry Ne I ncome t

2010 PH P 30,212,084.00

Pe e g rc nta e

100%

208,671.00 100,119.00 3,925,313.00 6344042

1% 0% 13% 21%

BAL ANCE SH EET Accounts re iva - ne ce ble t I nve ntory I nve stme in a nts ssocia s te T OT AL ASSET S T ra a othe pa ble de nd r ya s Re ine Ea ta d rnings T OT AL L I ABI L I T I ES AND EQUI T Y

2010 PH P 23,378,056.00 67,409.00 28,563,193.00 618,640,704.00 138,286,626.00 59,831,982.00 618,640,704.00

Pe e g rc nta e

4% 0% 5% 100% 22% 10% 100%

*Refer to the attached audited financial statements at the end of this analysis for a detailed Financial Statement. Income Statement items. The bases for computing the percentage is Revenue. Having revenue as 100% will help us determine the relationships of the components of the net income. The cost of sale can be seen under the breakdown of Direct Cost and Expenses. In 2010 the corporation incur around 0.691% of cost in selling its inventory. The interest expense of Asaje Realty Corporation is only .331% of the revenue. The Equity in Net Income of subsidiary is 12.993% of the revenue. As for the return on sales of Asaje, it is 20.998% of the revenue. Based from the computations above, the Asaje Realty Corporation is having a greater percentage of sales return from its subsidiaries. Balance sheet items. The bases of computation for the asset component are the total assets and for the liabilities and equities component are the total liabilities and equities. From the computations above, the total assets is composed of 3.7789% of accounts receivable, 0.01% of inventory, 4.6171% of investments in associates and 91.6% of other types asset. The component of total liabilities and equities is composed of 22.353% of trade and other payables, 9.6715% of retained earnings and 68% of other liabilities and equities. With this information, one can find that Asaje has more trade and other payables on its books.

Financial Ratio Analysis Asaje Realty Corporation

PROFIT ABI L IT Y RAT I OS 2009 2010 2011

ROE

Net Income-Preferred Dividends Average Common stockholder's Equity

3,159,973.00 155,657,955.00

2.0301%

6,344,042.00 160,409,962.00

3.9549%

(26,509,872.00) 150,327,872.00

-17.6347%

EPS

Net Income-Preferred Dividends Average Common Shares

3,159,973.00 1,037,500.00

3.0458

6,344,042.00 1,037,500.00

6.1147

(26,509,872.00) 1,037,500.00

(25.5517)

ROA

Net Income+ (Interest Expense(1-Tax rate)) Average Total Assets

4,127,548.00 516,125,451.50

0.7997%

6,414,125.30 577,250,454.00

1.1112%

(26,482,004.30) 666,013,667.00

-3.9762%

For common stockholders, the return that they receive on their investment is of importance. Of special interest to them is how they are being treated relative to other suppliers of capital funds. In 2009, Asaje Realty has a 2.0301% of return on equity which means that for every 1 peso that a common stockholder invests in its equity, it gets 0.020301 pesos. As compared to its industry, it is -0.37%. Asajes return on equity for 2009 is greater as compared to its industry which means that the investors of Asaje for 2009 have received a greater return. In the same year, the companys earnings per share is roughly 3.0458. If the company declares its net income to its stockholders, each stockholder would receive 3.0458 pesos per share. The companys return on assets for 2009 signals that it has efficiently used its assets with a return of 0.7997% as compared to its industry average of -1.14%. Asaje has used its assets efficiently for about 0.3403% higher compared to its industry. For 2010, Asajes return has increased of about 1.9248% making its return on equity on the same year at 3.9549%. Compared to its industrys average of -0.37%, this year, Asajes return on equity is higher making the company achieve a greater return on its equity which means that is has earned a high value of income compared to its equity. In the same year, the companys earnings per share increased by 3.0689 making its earnings per share to reach 6.1147. An investor would be happy to know that it would receive almost twice that it would receive for the previous year. On the other hand, its return on assets for 2010 is 1.1112%. One can notice that it has efficiently used its assets by about 0.3115% as compared to that of 2009. Still, the company has a higher return on assets as compared to its industry average of -1.14%. All ratios, as compared to 2009, has increased. For 2011, Asajes return on equity, earnings per share and return on assets decreased and worse, it has deemed to be negative which signals a bad year for the company. Analyzing their ratios, it has not used its capital efficiently and also its assets. This has an impact to the company because the

investors might be afraid to invest in the company as what can be seen from its previous years ratios. The return on equity has dropped vastly to -17.6348%; the return on assets dropped to -3.9762%; the earnings per share dropped to -25.5517. An investor might be afraid to invest in the company by looking at this years ratios. One might see that the return on assets of Asaje is not being efficiently used up this year as well as its return on equity. From only an industry average of -0.37%, Asajes return on equity is -17.6348% which means that a common stockholder would incur a loss if it would invest in the company for this year.
L I QUI DI T Y RAT I O 2009 2010 2011

Current Ratio

Current Assets Current L iabilities

90,809,633.00 22,820,722.00

3.9793

94,472,467.00 138,286,626.00

0.6832

112,728,756.00 137,286,716.00

0.8211

Quick Ratio

Cash+ arketable Securities+ M A/R Current L iabilities

90,485,663.00 22,820,722.00

3.9651

94,202,560.00 138,286,626.00

0.6812

112,455,167.00 137,286,716.00

0.8191

A/R Turnover

Net Sales Average Accounts Receivable

22,227,320.00 11,216,692.00

1.9816

30,212,084.00 15,918,768.00

1.8979

22,483,645.00 23,173,004.00

0.9703

Turnover in days

365 A/R Turnover ratio

365.00 1.9816

184

365.00 1.8979

192

365.00 0.97

376

Inventory Turnover

Cost of Sales Average Inventory

191,456.50

208,671.00 76,976.00

2.7109

67,409.00

Turnover in days

365 Inventory Turnover ratio

365.00 -

undefined

365.00 2.7109

135

365.00 -

undefined

In 2009, 2010 and 2011, Asaje has the ability to pay its short-term liabilities out of its short-term assets for 3.9793 times, 0.6832 times, and 0.8211 times respectively. One can see that its current ratio has dropped dramatically from 2009 to 2011. In 2009, one can evaluate that Asaje has the sufficient liquidity to cover its short-term liabilities out of its short-term assets. With an industry average of 3.8 times, Asaje in 2009 belongs to the average real estate companies who have the adequate liquidity. But in 2010 and 2011, this is not the case, because of the dramatic drop of its current ratio; one can say that its financial position could be greatly deteriorating. In 2009, 2010 and 2011, Asajes receivables are held for almost 184 days, 192 days and 376 days, respectively before being converted to cash. Asajes condition in comparison to its industry of 913 days is really good. The fast turnover of its accounts receivable signals that there is a need for Asaje to maintain its credit and collection policies for the conversion of its receivables to cash. Asaje is really doing good in its collection of accounts receivable for the past three years. For the three years 2009, 2010 and 2011, Asajes inventory turnover is 0 days. This means that it has not sold any inventory for the three years. It is just equal as

compared to industry average of 0 days. More attention to its inventory policies and marketing activities must be done by the company.
L EVERAGE RAT I O 2009 2010 2011

TIE

Income before Taxes+ Interest Expense Interest Expense

1,712,713.00 1,382,251.00

1.2391

2,518,848.00 100,119.00

25.1585

82,482.00 39,811.00

2.0718

Debt Ratio

Total L iabilities Total Assets

378,622,262.00 535,860,204.00

0.7066

455,058,721.00 618,640,704.00

0.7356

576,314,517.00 713,386,630.00

0.8079

Debt-to-Equity

Total L iabilities Total Stockholder's Equity

378,622,262.00 157,237,941.00

2.4080

455,058,721.00 163,581,983.00

2.7818

576,314,517.00 137,072,111.00

4.2045

Unlike other sources of capital, debt carries with it the threat of default foreclosure and bankruptcy if income does not meet projections. Holding debt increases the riskiness of a company. In 2009, 2010 and 2011, the companys debt ratio is 0.7066 times, 0.7356 times and 0.8079 times. The industrys average for this ratio is 18.7 times. Asajes debt ratio is in the lower quartile which might indicate that the company has lesser liabilities as compared to its assets. This may mean the company might still have the capability to use additional credit or invest in long-term liabilities because its assets are too much to cover. It might also mean that the company has not used well its assets and it may use these assets to invest in some other capital to generate more income for the company. Another ratio which can be used by long-term creditors is the debt-to-equity ratio. This ratio compares the amount of debt that is financed by stockholders. For Asaje, its debt-to-equity are as follows: 2.408 times, 2.7818 times and 4.2045 times for 2009, 2010 and 2011 respectively. With an industry average of 3.5 times, the stockholders have financed most of the assets of the firm. Stockholders would like this ratio to be higher because it indicates that the company is more leveraged and stockholders can reap the return of the creditors financing. The times-interest-earned ratio calculates that interest expense burden of a company. The lower this ratio is, the more the interest expense is a burden to a company. In case of Asaje, it is evident that the company has an interest expense burden for the years 2009 and 2011 with a times-interest-earned ratio of 1.2391 times and 2.0718 times respectively. On the positive side, Asajes times-interestearned ratio for 2010 is one of the highest as compared to its industry with 25.1585 times which means that its income before taxes is more than to cover its interest expense.

The company was incorporated in the Philippines and is engaged in leasing and renting out buildings, condominium units, commercial spaces, and Information Technology (IT) Park. The company is also engaged in operating a hotel (Microtel) under a franchise agreement. (Note 1)

Damosa Land, Inc.

Horizontal Analysis Damosa Land, Inc.

Amount of incre s /(dec a e ae re s )

INCOM E ST AT EM ENT Re nue ve Dire cost a e nse (De cia ct nd xpe s pre tion I nve stme Prope nt rty) Dire cost a e nse (De cia ct nd xpe s pre tion - Prope rty a e nd quipme nt) I nte st a othe re nd rs Ne income t

2009 PH P 105,327,786.00

Pe e rc ntag e

2010

2011

Pe enta e rc g

91% PH P 116,305,744.00 100% PH P 124,982,233.00 100%

107% 101%

PH P 8,676,489.00

26,386,190.00

96%

27,501,921.00

27,771,155.00

269,234.00

5,677,112.00 13,327,243.00 12,663,883.00

111% 152% 60%

5,114,294.00

100%

4,267,827.00 6,081,570.00 26,912,750.00

83% 69% 127%

(846,467.00) (2,684,620.00) 5,757,828.00

8,766,190.00 100% 21,154,922.00 100%

BAL ANCE SH EET

20 09 PH P 8,726,393.00 681,876,736.00 13,162,324.00 87,660,714.00 (880,196.00)

Pe e rc ntag e

2 0 01

20 11 PH P 13,221,352.00 733,234,629.00 14,312,800.00 39,333,334.00 47,187,576.00

Pe enta e rc g

Amount of incre s /(dec a e ae re s )

Trade and other receivables Investment property Property and equipment L ong-term debt, net of current portion Retained Earnings

78% PH P 11,188,479.00 100% 104% 145% 142% -4% 657,761,936.00 100% 9,091,149.00 100% 61,809,524.00 100% 20,274,820.00 100%

118% 111% 157% 64% 233%

PH P 2,032,873.00 75,472,693.00 5,221,651.00 (22,476,190.00) 26,912,756.00

*Refer to the attached audited financial statements at the end of this analysis for a detailed Financial Statement.

Trade and other receivables & Total Revenue. The trade and other receivables account increased to 118.17% since the year 2010. A huge bulk of the trade and other receivables was due to an increase in trade transactions with third-party customers amounting to Php 8,919,090 and Php 6,859,173 for the years 2011 and 2010 respectively. Despite the huge amount of revenue from leasing investment properties to Anflo Investment and Management Corp. (ANFLOCOR) which is its parent company amounting to Php 3,144,321 for the year 2011, its increase in trade and other receivables cannot be attributed to such inference. To highlight, Damosa Land, Inc. gets its revenue primarily from engaging in leasing and renting out building, condominium units, commercial spaces and Information Technology (IT) Park. Furthermore, the company is also engaged in operating a hotel (Microtel) under a franchise agreement. It can be observed that most of the account in the balance sheet are changing in favor of the company wherein the revenues recorded during 2009 is now only a portion of the total revenues in 2010. The trade and other receivables were also affected with the increase in the revenues but not reaching almost 50%. Much of companys revenue is primary coming spaces, condominium units, commercial spaces, and enumerated lease agreements, the company earned 36.3 million and Php 31.3 million for the years Commercial spaces. from leasing out office an IT park. Out of the a total income of Php 2011 and 2010 from

Investment property & Depreciation IP. Investment property account increased to 111.47% which was primarily due to various additions in land, land improvements, buildings and improvements, and construction in progress. The construction in progress account contributed greatly to the increase of the investment property account which also gave the reason why despite the increase in investment property the depreciation attributable to the account increased by just .98% only. Since the company uses its investment property as a source of income, a bulk of the direct costs and expenses is attributable to the depreciation charges from using the investment properties. Depreciation charges attributable to investment properties comprises 86.44% and 84.09% of the total depreciation charges during the years 2011 and 2010, respectively, or an increase to 100.98% during the years covered by the analysis. Investment property may have decreased during 2010 but still depreciation charges in relation to the investment properties of the company grew at an insignificant percentage of 4%. Furthermore, the total revenue from the above investment properties amount to Php 113.3 million and Php 107.2 million for the years 2011 and 2010, respectively, or an increase to 105.69%.

Property and equipment & Depreciation PE. The property and equipment increased to 157.44% since year 2010 due to various additions in transportation equipment and office furniture and equipment. Such increases amounted to 5,221,651, net of the depreciation recognized during the year. A huge amount deducting the total revenue of the company each year is attributed to depreciation which is 34.66% and 35.89% of the total costs and expenses for the years 2011 and 2010, respectively. Much of the depreciation expense for this type of company is considered as a direct cost since it earns revenue from investments properties. Depreciation attributable to property and equipment amounted to 4,267,827 and 5,114,294 for years 2011 and 2010, respectively, or a decrease to 83.45%. The property and equipment account may have decrease by almost 50% but the change in the depreciation charges during the period 2010 isnt considered significant compared to the asset account to where it is attributable. The depreciation charges from the property and equipment arent really directly related to the operations of the company as a lessor investment properties. Long-term debt & Interest and others. Long-term debt which is net of the current portion decreased to 63.64% during the years covered by the analysis. Much of the loans were obtained to finance the construction of the companys new buildings. Prior year borrowings amounting to Php 18 million and Php 118 million affects largely the balance of the long-term debt of the company. The significant decrease in the long-term debt of the company was due to the companys commitment to its agreement with financial institutions which provides certain restrictions and requirements for the company to maintain certain financial ratios. In relation to the decrease in long-term debts is also the significant decrease in interest charges against the company. Interest charges decreased to 69.38% primarily due to installment payments and the companys inclusion of interest charges as part of the cost of the asset being constructed. Interest charges during 2010 dropped with almost the same amount of percentage with its related liability account which is the long-term debt. Further decrease in the liability account also allowed for more income to be recognized during the year as interest charges will also go down. Total interest capitalized amounted to Php 6.1 million and Php 6.5 million as of December 31, 2011 and 2010, respectively. Such amounts were reflected as part of the Buildings and improvements account under the account investment property. Retained earnings & Net income. The retained earnings did not receive significant amount of changes other than the additions to it due to the continuous positive bottom line of the company from its operations. Nevertheless, the 232.74% increase of the retained earnings account is

indicating a successfully managed operation by the company since the companys Php 880,096 deficit in 2009 due to continuous losses from the years previous to 2009 which was only regained starting 2010 after the company posted a net income of Php 21,154,922 in 2009 which was 24 times the required amount to eradicate the loss from the balance sheet. Its get back from its negative retained earnings can be attributed to its huge leap in revenues from its main operations. Revenues increased to 108.73% from 2010 while also maintaining a close increase in percentage from direct costs and expenses posting at 104.50%. The bottom line figure presented under the companys balance sheet increase to 127.22% since 2010.

Vertical Analysis Damosa Land, Inc.

I NCOM E ST AT EM ENT Re nue ve Dire Cost a Expe s ct nd nse De cia pre tion - I nve stme prope nt rty De cia pre tion - Prope a e rty nd quipme nt I nte st a othe re nd rs Ne I ncome t

2010 PH P 116,305,744.00

Pe e g rc nta e

100%

27,501,921.00 5,114,294.00 8,766,190.00 21,154,922.00

24% 4% 8% 18.2%

BAL ANCE SH EET T ra a othe re iva s de nd r ce ble I nve stme prope nt rty Prope a e rty nd quipme nt T OT AL ASSET S L ong-te de ne of curre portion rm bt, t nt Re ine Ea ta d rnings T OT AL L I ABI L I T I ES AND EQUI T Y

2010 PH P 11,188,479.00 657,761,936.00 9,091,149.00 884,111,298.00 61,809,524.00 20,274,826.00 884,111,298.00

Pe e g rc nta e

1.3% 74.4% 1.0% 100% 7.0% 2.3% 100%

*Refer to the attached audited financial statements at the end of this analysis for a detailed Financial Statement.

Income statement items. The total revenue of the company was used as the base of the other account titles in the analysis. Direct cost and expenses comprise much of the total costs and expenses. From which, depreciation charges were significant in identifying the cost attributable to the revenues earned from using the investment properties. Depreciation charges related to property and equipment comprise 4.40% of the total revenues and 13.28% and 15.64% of the total depreciation charges during the years 2011 and 2010. Depreciation expense related to the investment properties comprises 23.65% of the total revenues. It is already clear why the depreciation expense related to the investment properties comprise bigger portion of the pie because of the nature of the company.

Interest expense of the company comprises 7.54% of the companys total revenues. The interest form a smaller part of the total revenues as a separate line item from direct cost and expenses and general and administrative yet some of it were already contributed as part of some of the investment properties and were later on included as part of the depreciation expense related to the investment properties. With the huge amount of borrowings, the interest incidental to it might pull down the net income of the company had the company not appropriated portion of the interest charges brought about by the borrowings to finance the construction of buildings. The net income of the company comprises 18.19% of the total revenues during 2010 after a huge amount of deductions from the operations and taxes. The net income of the company provided positive figures for the company since the end of 2009, covering the huge deficit in retained earnings as seen in its 2008 retained earnings account. Balance sheet items. Based on the companys statement of financial position, a huge amount composing the companys total assets is coming from the investment properties account. Investment properties comprise 74.40% of the total assets of the company. Furthermore, the investment properties account is an aggregate of the other assets comprising it such as land, land improvements, condominium units, buildings and improvements and construction in progress. Of the accounts components, buildings and improvements bulk the entire amount. Trade and other receivables comprise 1.27% of the total assets of the company during 2010. The company realizes their receivables in a short span of time since most of its customers are huge companies or business entities. Furthermore, the trade receivables are non-interest bearing and are generally on 30 days term. Unlike other companies whose trade receivables comprise greatly the total assets compared to its cash and cash equivalents account, Damosa Land, Inc. has its cash and cash equivalents comprising 14.23% of the total assets and 52.63% of the total current assets. Property and equipment account comprise 1.03% of the companys total assets since the company isnt primarily engaged in using the properties comprising the account for business or operations. Accounts which comprise the property and equipment account are transportation equipment and office furniture and equipment. The long-term debt which is net of the current portion comprises 30.92% of the total liabilities of the company. It comprises much of the total liabilities due to the companys need for financing to construct buildings to be added under the account of investment properties.

Retained earnings of the company posted 2.29% of the companys total equity during 2010. The account is slowly increasing from its negative figures since the beginning of 2009. The retained earnings account of the company was only affected by changes in the net income or loss of the company over the years. No payments of dividends to stockholders were observed during the analysis of the financial statements from 2009 to 2011. Financial Ratio Analysis Damosa Land, Inc.
PROFI T ABIL IT Y RAT I OS ROE Ne Income-Pre rre Divide t fe d nds Ave ge Common stockholde Equity ra r's 2009 12,663,883.00 514,955,342.50 0.02 2010 21,154,922.00 673,627,859.00 0.03 2011 26,912,750.00 792,874,195.00 0.03

EPS

Ne Income-Pre rre Divide t fe d nds Ave ge Common Sha s ra re

12,663,883.00 3,148,934.00 4.02

21,154,922.00 3,870,435.00 5.47

26,912,750.00 3,995,435.00 6.74

ROA

Ne I ncome (Inte st Expe (1-T ax ra )) t + re nse te Ave ge T ota Asse ra l ts

21,992,953.10 809,200,736.50 0.03

27,291,255.00 844,701,287.00 0.032

31,169,669.00 972,694,253.50 0.03

Profitability ratios are computed to assess the earning ability of the company. By doing so, it would be useful for a common stockholder to know the extent to which the invested funds are being used efficiently. Based from the computations above, a common stockholder is receiving a lesser return for three years for investing in Damosa Land Inc. since the company's average return on equity is only .03 times which a lot lower than the industry's rate of 0.244. Aside from its lower return on equity, the earnings per share of the company are also lower than 0.43 per share as compared from the industrial ratios. Another one is the return on assets which is also lower by .08 times than the industrial rates. As a whole, even though a common stock holder is not incurring any loss, he would be better of not to invest in Damosa Land Inc.
L IQUI DIT Y RAT IO Curre Ra nt tio Curre Asse nt ts Curre L ia nt bilitie s 2009 100,105,957.00 38,561,791.00 2010 193,510,417.00 118,934,145.00 2011 286,892,571.00 101,084,225.00

2.60

1.63

2.84

0.02

Quick Ra tio

Ca M a ta Se sh+ rke ble curitie A/R s+ Curre L ia nt bilitie s

100,105,957.00 38,561,791.00

2.60

109,697,700.00 118,934,145.00

0.92

197,491,759.00 101,084,225.00

1.95

0.0132

A/R T urnove r

Re nue ve Av ra Accounts Re iva e ge ce ble

97,045,544.00 10,186,958.50

9.5264

107,184,988.00 7,114,572.50

15.0656

113,282,985.00 8,532,761.50

13.2762

11.58

T urnove in da r ys

365 A/R T urnov r ra e tio

365 9.5264

38

365 15.0656

24

365 13.2762

27

32

Liquidity ratios are computed to evaluate the ability of an entity to pay its short term debts. With these computations, a short term creditor will be

able to determine if an entity have or doesnt have a short term financial strength to meet its short term obligations. From the computations above, the current ratios for three consecutive years are favorable for a short term creditor since the current assets of the company will be able to cover up its current liabilities for around 2.4 times. The companys quick or acid ratio is also favorable since the industrial ratio is lower than that of the company by approximately 1.81 times. The accounts receivable turnover is also favorable because the company has a higher turnover that the industry. And the turnover in days of the industry is 5 days higher than the companys turnover in days; this means that it would only take 27 days for the company to collect their credit sales as compared to the 32 days of the industry.
L EVERAGE RAT I O TIE Income be fore T a s+ nte st Expe xe I re nse I nte st Expe re nse 2009 28,999,509.00 13,327,243.00 2.18 2010 33,947,533.00 8,766,190.00 3.87 2011 38,373,383.00 6,081,570.00 6.31

De Ra bt tio

T ota L ia l bilitie s T ota Assets l

142,240,878.00 805,291,276.00

0.18

199,905,978.00 884,111,298.00 0.23

159,734,139.00 1,061,277,209.00 0.15

De bt-to-Equity

T ota L ia l bilitie s T ota Stockholde Equity l r's

142,240,878.00 663,050,398.00

0.21

199,905,978.00 684,205,320.00 0.29

159,734,139.00 901,543,070.00 0.18

Leverage ratios are computed in assessing how much debt the company has on its balance sheet, in another words leverage ratios are used in assessing the companys debt position. From the computations above, the times-interest-earned ratio of the company is better than the industry since its TIE is higher by .12 times. This means that Damosa Land has no burden in paying its interest with the income earned from the companys operations. As to the companys debt ratio, Damosa Land is also better off since it has a .15 ratio compared to the .29 of the industry. The company is better off because the lower the debt ratio is the less risky is the company than those with higher ones. As to its debt-to-equity the company has a 0.18 ratio compared to the 0.34 industrial ratio. This means that the company is using more equity than debt in financing its operation. Damosa Land Inc. has a good debt-carrying ability since it is able to pay its interest from the earnings of its operations, it is less risky than those with higher debt ratio and lastly more of its assets are finances by equity than debt.

Lapanday Agricultural & Development Corporation

The company was registered with the Securities & Exchange Commission (SEC) March 20, 1970 primarily to engage in the production and exportation of Cavendish bananas. The company is a subsidiary of Lapanday Foods Corporation (LFC). The companys ultimate parent company is the Lapanday Holdings Corporation. (Note 1)

Horizontal Analysis Lapanday Agricultural & Development Corporation

Am ount of
Pe nta e rce g

I NCOM E ST AT EM ENT Sa s le Cha in FV le Estima d point of sa costs of nge ss te le biologica a ts-sta l sse nding crops Cost of Sa s le Gross Profit Ge ra a Administra Expe ne l nd tive nse Ne Loss t

2009 PH P 525,094,395.00

Pe e rc ntag e

2010

2011 100% PH P 463,199,506.00

incre /(de a ) ase cre se

94% PHP 557,105,611.00

83% (PHP 93,906,105.00)

29,096,286.00 531,926,418.00 22,264,263.00 38,236,133.00 19,146,156.00

556% 102% 53% 109% 1156%

5,236,275.00 520,496,694.00 41,845,192.00 35,190,361.00 1,655,923.00

100% 100% 100% 100% 100%

4,925,509.00 443,807,388.00 24,317,627.00 30,698,364.00 24,207,070.00

94% 85% 58% 87% 1462%

(310,766.00) (76,689,306.00) (17,527,565.00) (4,491,997.00) 22,551,147.00

BAL ANCE SH EET Ca a ca e sh nd sh quiva nts le T ra a othe re iva s de nd r ce ble T ra a othe pa ble de nd r ya s Biologica Asse l ts-sta nding crops Re ine Ea ta d rnings

2009 PH P 18,376,954.00 121,628,558.00 388,863,834.00 191,883,878.00 35,410,489.00

Pe e rc ntag e

2010 PH P 28,126,779.00 187,676,033.00 432,883,925.00 197,120,153.00 33,754,566.00 100% 100% 100% 100% 100%

2011 PH P 2,339,717.00 298,701,131.00 535,235,589.00 202,045,662.00 9,547,496.00

Pe nta e rce g

Am ount of incre /(de a ) ase cre se

65% 65% 90% 97% 105%

8% (PHP 25,787,062.00) 159% 124% 102% 28% 111,025,098.00 102,351,664.00 4,925,509.00 (24,207,070.00)

*Refer to the attached audited financial statements at the end of this analysis for a detailed Financial Statement.

We have set the base year at 2010, so all accounts within the said year equates to 100%. Let us first browse through the horizontal analysis of the companys income statement. Sales on 2009 appear to become larger than sales made on 2011. There had been a slight increase from year 2009 to the base year 2010 and a sudden drop from sales on 2011. On the other hand, cost of sales during 2009 is higher by 2% than the base year. Similar to sales on 2011, cost of sales resulted to a sudden drop of 15% as compared to the base year signifying decrease sales on 2011. The change in Fair Value less Estimated point of sale cost of Biological Assets-standing crops account which the company treats also as a deduction from sales before arriving at there gross profit from sales is dramatically high in year 2009 which also resulted to a sudden drop in amount in the succeeding years 2010 and 2011. With these amounts, Gross profit from sales can be derived. Due to the large amount of deductions made from sales on 2009, the gross profit from that year didnt appear to be that attractive. On 2010, Gross profit increased 188% of its value from 2009. In the year 2011, due to a drop in amount of sales, the gross profit also decreased as compared to the base year by 42%. General and Administrative Expenses was decreasing from year 2009 to 2010. From all the income and expenses incurred, the company resulted to a net loss for 3 consecutive years that had been fluctuating dramatically. On 2009, a loss of (19,146,156) was incurred. On 2010, it resulted to a negative (1,655,923). And recently, on 2011, it had a (24,207,070) net loss. This dramatic fluctuation of loss and the fact that for 3 consecutive years the company had incurred losses is quite questionable. Asaje Company is not a company which had just started its business that may be understandable to incur losses for consecutive number of years due to investments made in the start of the company. These losses may be due to expenses incurred by the company as compared to the income they generate. The company might have been too lenient with its disbursements while not pushing too hard in sales, thus, resulting to net losses for 3 consecutive years. For the Balance Sheet of the company, Cash and cash equivalents from 2009 had increase in amount but a large drop in amount occurred in 2011. There was a large build up of trade and other receivables from yea 2009-2010. The account trade and other payables also signify an increase in value for 3 consecutive years. Biological Assets-standing crops had been also increasing from 2009 to 2010. On the other hand, Retained earnings had been dropping from 2009 to 2010 in the same fashion. These percentages are congruent with the results shown on their income statement. The companys liquidity is low evidenced by the decrease of cash by 98% from the base year 2010. The massive build up of receivables also shows that the company had not been efficiently collecting from what they sell on credit. This may be sacrificial to the image of the companys performance. From 2009 to 2010, their payables have been continually

increasing. With their liquidity issues their creditors might not anymore extend more credit to them. Vertical Analysis Lapanday Agricultural & Development Corporation
I NCOM E ST AT EM ENT Sa s le Cha in FV le Estima d point of sa costs of nge ss te le biologica a ts-sta l sse nding crops Cost of Sa s le Gross Profit Ge ra a Administra Expe ne l nd tive nse Ne L OSS t 5,236,275.00 520,496,694.00 41,845,192.00 35,190,361.00 1,655,923.00 1% 93% 8% 6% 0.3% 2010 PH P 557,105,611.00 Pe e g rc nta e 100%

BAL ANCE SH EET Ca a ca e sh nd sh quiva nts le T ra a othe re iva s de nd r ce ble T ra a othe pa ble de nd r ya s Biologica As ts-sta l se nding crops Re ine Ea ta d rnings T OT AL ASSET S

2010 PH P 28,126,779.00 187,676,033.00 432,883,925.00 197,120,153.00 33,754,566.00 821,855,525.00

Pe e g rc nta e 3.4% 22.8% 52.7% 24.0% 4.1% 100.0%

*Refer to the attached audited financial statements at the end of this analysis for a detailed Financial Statement.

Balance sheet items. The vertical analysis of the companys balance sheet is based from the amount of total assets against other accounts existing in the balance sheet. From the total assets, the account that greatly affected the balance sheet is the trade and other payables. Out of the total assets, 52.7% is from trade and other payables. This signifies that the company is highly leveraged. This may be sacrificial to the companys image since too leveraged companies have the tendency of bankruptcy if not controlled and maintained strictly. It is also highly alarming that the liquidity of the company is very low. Cash and cash equivalents only represent 3.4% of the companys total assets. This doesnt look very attractive for the companys financial capabilities as against their creditors which comprise a high percentage from the total assets.

Income statement items. The vertical analysis on the income statement is based from the amount of Sales of the company. Thus, sales equates to 100% against all the other accounts that the company uses. Lets first see the deductions from sales for us to get the gross profit. First, the account Change in FV less Estimated point of sale costs of biological assetsstanding crops amounts to 1% while the cost of sales signifies 94% from the companys sales. With the following deductions from sales, the gross profit derived from sales is 8%. General and Administrative costs represent 6% of sales. Net loss is (3%) of sales. The account that greatly affects the sales is the cost of sales. The cost of selling is the factor that decreases the amount derived from sales the greatest. As mentioned from the horizontal analysis, they maybe too lenient with their costs and not enough efforts to push their products to the market.

Financial Ratios Analysis Lapanday Agricultural & Development Corporation

PROFI T ABI L IT Y RAT I OS ROE Ne I ncome t -Pre rre Divide fe d nds Av ra Common stockholde Equity e ge r's 2009 (19,146,156.00) 108,878,726.00 2010 (1,655,923.00) 127,377,686.50 2011 (24,207,070.00) 143,346,190.00

(0.18)

(0.01)

(0.17)

EPS

Ne I ncome t -Pre rre Divide fe d nds Ave ge Common Sha s ra re

(19,146,156.00) 5,220,000.00

(3.67)

(1,655,923.00) 8,110,000.00

(0.20)

(24,207,070.00) 11,000,000.00

(2.20)

ROA

Ne I ncome (I nte st Expe (1-T a ra )) t + re nse x te Av ra T ota Asse e ge l ts

(11,223,843.70) 676,317,686.50

(0.02)

3,777,092.70 779,242,570.00

0.005

(20,147,070.00) 858,126,296.00

(0.02)

Based from the computations for profitability ratios, one can say that the company is not doing well because of its negative ratios. If we will compare the companys computed return on equity with the industry average ratio, it can be clearly seen that from 2009-2011 the companys ratios are below the industrys average ratio which is 22.6%. For the companys earnings per share it is still below the average of 5.57. Lastly, for the Lapandays return on asset it is still below the average of 1%-5%. With these ratios, we can see that it wouldnt be wise to invest in Lapanday.

L I QUI DIT Y RAT I O Curre Ra nt tio Curre Asse nt ts Curre L ia nt bilities

2009 573,616,645.00 467,188,649.00

2010 610,185,001.00 452,240,473.00

2011 714,420,776.00 609,611,336.00

1.23

1.35

1.17

Quick Ra tio

Ca M a ta Se sh+ rke ble curitie A/R s+ Curre L ia nt bilities

86,480,341.00 467,188,649.00

0.19

115,477,418.00 452,240,473.00

0.26

281,710,559.00 609,611,336.00

0.46

A/R T urnov r e

Ne Sa s t le Ave ge Accounts Re iva ra ce ble

525,094,395.00 60,530,366.50

8.67

557,105,611.00 77,727,013.00

7.17

463,199,506.00 225,644,871.50

2.05

T urnove in da r ys

365 A/R T urnov r ra e tio

365.00 8.67

42.10

365.00 7.17

50.91

365.00 2.05

178.05

Lapandays current ratios for 2009 to 2011 fall between the industry average which is 1%-5% which means the companys ability to pay its debt is stable. For its quick ratios, it falls below the industry average ratio of 0.87. The companys accounts receivable turn-over for the years 2009 and 2010 is greater than the industry average of 3.84. However, for the year 2011 it is below the average. For Lapandays turn-over in days, in years 2009 and 2010, its turn-over in days is faster compared to the industry average of 95 days but its turn-over in days for 2011 is slow compared to the average.
L EVERAGE RAT I O TIE Income be fore T a s+ nte st Expe xe I re nse I nte st Expe re nse 2009 (8,898,991.00) 11,317,589.00 (0.79) 2010 10,687,315.00 7,761,451.00 2011 1,506,817.00 5,800,000.00

1.38

0.26

De Ra bt tio

T ota L ia l bilitie s T ota Asse l ts

637,323,967.00 736,629,615.00

0.87

666,405,800.00 821,855,525.00

0.81

763,154,412.00 894,397,067.00

0.85

De bt-to-Equity

T ota L ia l bilitie s T ota Stockholde Equity l r's

637,323,967.00 736,629,615.00

0.87

666,405,800.00 155,449,725.00

4.29

763,154,412.00 131,242,655.00

5.81

The times interest earned ratio of Lapanday Corporation is below the industry average ratio of 12.45 for the years 2009, 2010 and 2011. The debt ratio and debt-to-equity ratio of Lapanday for 2009 to 2011 are relatively higher compared to the industry average (30%-55% for debt ratio and 44%122% for debt-to-equity ratio).

Appendix